Student loans' new oversight

Got a problem with your student loan? Not sure where to turn when the company managing your payments isn't responding to your complaints?

Michelle Singletary

Got a problem with your student loan? Not sure where to turn when the company managing your payments isn't responding to your complaints?

Come March, you'll have a powerful ally, because the Consumer Financial Protection Bureau will have supervisory authority over non-bank student loan servicers. The agency already had the authority to supervise student loans handled by the largest banks. Its expanded power will include non-bank servicers that manage more than 1 million accounts, regardless of whether they involve federal or private loans. The CFPB estimates it will have authority to oversee the seven largest student loan servicers with more than 49 million borrower accounts.

The agency's student loan ombudsman, Rohit Chopra, released a report recently highlighting issues borrowers have had with the way their private student loans were being handled. The Consumer Bankers Association felt it was misleading, relying on a small percentage of all people who have private student loans to make sweeping characterizations of the marketplace.

But we don't have to go too far in the past for an example of problems in loan servicing: the housing crisis that led to many complaints about residential mortgages. The CFPB is concerned that we face a sequel on a similar scale. With outstanding debt at about $1.2 trillion, student loans have now become the second-largest debt load after mortgages.

"We have heard complaints from private student-loan borrowers that their servicer is not held accountable for answering their questions and providing quality customer service," CFPB Director Richard Cordray said during a teleconference with reporters. "Borrowers have complained that they had trouble making prepayments or partial payments on their loans. They have also complained that when their loans were transferred between servicers, their paperwork was often lost and processing errors were made that resulted in late fees."

The CFPB needs to hear more. Go to consumerfinance.gov/complaint and let your voice be heard. The more specific cases it investigates about what's happening when you pay your student loans or the roadblocks you face when you can't, the better the agency can identify trouble spots during its examinations. Your experiences can impact reform that may be needed.

But your complaint won't just be for informational purposes. It may get resolved. The CFPB forwards complaints to the servicing company and will work on getting you a response. Once a complaint is made, the servicer has 15 days to respond to the borrower and the CFPB. The agency expects companies to then resolve the issue within 60 days. You can track the status of your complaint and get email updates about it.

I expect the agency to shine a light on servicing problems with both federal and private student loans.

Contact Michelle Singletary, a financial columnist at The Washington Post, at michelle.singletary@washpost.com.